Teaching Note | HBS Case Collection | October 2007

Gordon Bethune at Continental Airlines (TN)

by Anthony Mayo

Abstract

A $385 million loss for the final months of fiscal year 1994 signaled Continental might go bankrupt. Could new CEO Gordon Bethune turn Continental around? Continental was in dire straits because the deregulation of the commercial airline industry in 1978 ushered in a new era focused on mergers and acquisitions and bitter employee-management relations. Venerable airline brands with a commitment to quality, like Continental, were prime takeover targets. After Texas Air Chairman Frank Lorenzo (HBS 1963) secured Continental in his hostile takeover bid, tensions escalated between Lorenzo and the old guard--especially when Lorenzo declared Continental bankrupt in the fall of 1983 and then fired and replaced half his staff with cheaper nonunion labor. In October 1994, five months after Continental exited its second bankruptcy, Bethune was elevated to CEO and created a Go Forward Plan to return Continental to profitability. Two years after unveiling the Go Forward Plan, Continental was at the top of the industry in a number of important performance metrics.

Keywords: Transformation; Insolvency and Bankruptcy; Profit; Leading Change; Organizational Change and Adaptation; Performance Improvement; Labor and Management Relations;

Citation:

Mayo, Anthony. "Gordon Bethune at Continental Airlines (TN)." Harvard Business School Teaching Note 408-071, October 2007.